tv Bloomberg Markets Bloomberg February 18, 2016 10:00am-11:01am EST
from bloomberg world headquarters in new york, good morning. here is what we are watching this hour. forget the new normal. are the stocks getting back to the old normal? we will have the latest on three-day gains from the s&p 500. you know that the fed raised interest rates. should the central bank have gone negative? we will talk to none other than john taylor. it is silicon valley versus the fbi. the biggest tech firms are backing apple in the fight over unlocking a terrorist iphone. you will head to the markets desk where julie hyman has the latest. the rally continues. not as strongly as it has in recent days. we are now seeing a mixed picture for stocks. earlier, futures were indicating a higher open. it has lost some steam here. the only major average actually
holding on to gains in stocks. to brandon's point about correlations breaking down, even as we see stocks muddle along, oil prices remain on the march higher. here they are up by about 3%. we have the american petroleum institute reported yesterday that crude supplies on especially fell by 3 million barrels last week. we will get government figures on those supplies at 11:00 a.m. and i will bring them to you. thaturvey is forecasting we will see an increase in supply. this could potentially change. if you look at imap on my bloomberg here, you see a mixed picture here as well. this is a different scenario than we have seen in recent days. energy stocks are actually lower, and consumer staples and discretionary stocks are down. seeing strength and technology. ibm is upgraded to overweight
over morgan stanley, the analysts say the company's transformation to a more cloud-based and analytics-based company is underappreciated by the market. they also agreed to purchase another health company for $2.6 billion. it is a privately held company. acquired by a chinese company for six plain dollars, $38.9 per share. the company coming out with earnings and predictive sales ahead of analyst estimates. >> there is some stuff in the markets showing some stuff going on in the underlying economy. where is consumers discretionary? julie: not doing well p long with staples, both are pulling back. part of it is company specific moods. discovery communications coming out with earnings that missed estimates. garmin surged yesterday after his earning beat yesterday -- estimates but it is cut to underweight from neutral today, jpmorgan say the rally -- rally
was an overreaction. then there is walmart, not actually in the discretionary index. but it is putting pressure on consumer discretionary. with a is coming out forecast to low analyst estimates but it did not account for currency in its forecast. it said same-store sales rose only .6% last quarter. things we can from the currency side, which a lot of companies have been it also not seeing the growth in u.s. sales. >> we will talk about mesko little later this mine. vonnie quinn, what have you got? vonnie: president obama will be making an historic trip to cuba. the president made the announcement on twitter, saying next month, i will travel to cuba to advance efforts that could improve the lives. more than a year ago, the cuban president agreed to normalize
relations. cuba is still criticized for human rights abuses. a retired supreme court justice replacingg the debate the late justice scalia. o'connor says president obama should nominate a replacement. he was appointed by president ronald reagan in 1981. he says mr. obama should leave the nomination to his successor. donald trump has a big lead heading into the presidential primary in south carolina. the bloomberg politics poll shows trump with a 19 point lead over ted cruz. marco rubio and jeb bush are fighting it out for third. rubio got it -- rubio got a big move yesterday. google, facebook, and other tech companies are supporting apple the fight against the u.s. government. rejected the order to unlock an iphone use by one of the shooters in san bernardino.
bey say the firm should not forced to build backdoors into their product. we will have more on this shortly. and, engaging contrast with ite, the company says dropped the box or after they said gay people are worse than animals. he apologized for the remark. global new suite four hours a day powered by our toy 400 journalists and more than 150 bureaus around the world. to the markets. u.s. stocks are fluctuating in early trading, following three days of gains. we are down for the year. are we finally seeing signs the market works the way it has always worked? let's talk about correlations. a stocks reporter for bloomberg. are all the old rules working again? can we just do everything we have done historically? class of do not think it is that
symbol but we see a breakdown in some of the correlations dragging down. you look at the value correlation of the s&p versus such asset classes as oil and high-yield bonds, that is breaking down a bit. it is welcome news for equity investors. those have been two of the most maligned asset classes of the year. cruderrelation between oil and s&p 500 was close to a 15 year high. it is welcome news for investors. >> what is the arc of this? when did we start noticing that asset classes should not have been correlated were correlated? >> started peeking people's interests earlier this year. the correlation between crude oil and the s&p as a very historical high, also the comparison to high-yield lawns and if you look at the between that and the
shanghai composite and many other global and the prices, those were elevated. the thing it boils down to is market fear. when the fear in the market is hasn elevated level, that them all trade as sort of a monolith. they all trade down and are as setas a risk everything sells simultaneously. the equity market can sort of be looked at by its fundamentals and less as an extension of crude oil trade. brendan: isn't it when we are most scared that we should make these decisions so clearly? to react sond emotionally and when we see risk , flows from equity and mutual -- mutualeople are funds, people are trying to deal risk. -- derisk.
it is also an extension of improving economic data. the citigroup u.s. economics index, it is a gauge of how economic data is doing compared to estimates, at a multi-month low, as recently as two was ago. it has really matched up with the rally. brendan: the index is fascinating. it used to be my job to pull it together and see correlations. it is really useful. thank you. to heidiurn richardson, an investment strategist at black rock, the world posse's largest asset manager, overseeing 4.5 chilean dollars. let's talk correlations. seeing theo correlations breakdown? is it ok to make to stations in the market? >> first, we have seen oil correlated with the s&p at .96. there has been
indiscriminate selling in global markets, quite frankly. was a risk asset, they are de-risking. the recent rally we are seeing, we are seeing a lot of short covering and this is a vacation week. it will be interesting to see the rally sustained in the next week when traders and portfolio managers come back from their vacation. short covering for betty liu in her vacation week this very day. let's talk about the elementals and economic growth. we have a rally for the last three days with people coming to their senses. the lmp capital and annual growth report and it does not look good. brazil,and the u.s., growth will be slowing over previous estimates in the coming year. is there a reason to be confident? >> i think there is. there are pockets of clothes -- of growth.
brazil is its own animal. they are in a large recession. we will put them to the side. if we look at the u.s. marketplace, the estimate is 2.5% economic growth for this year. i do not think we are on the verge of the recession for the year. i think growth is slowing. we have got struggles with the strong dollar impacting earnings . it was just mentioned about walmart and looking at the locations of earnings and the strong dollar. growth thateas of if we look at emerging markets, even the developed economies by china dragged down slowing. look at japan. even the economic growth and exports are slowing down because of china. i pulled up the u.s. generic 10 year. we're looking at yields on the 10 year. 1.79 is a little of a bounce back, higher than it was a
couple of weeks ago. is that priced correctly? >> start of the year to two. gold, it isat similar to treasuries. no one touched gold in the last years. i do not think it is the right instinct. there has been an indiscriminate selloff across global assets. are opportunities that i do not think the three-day rally is the time to go, back of the build huge conditions. long-term investors, there are great opportunities created in volatility. the guidance they gave in that is, i think impossible for the year. pricing and close to 50% for december. maybe if economic growth really
improves, there will be two hikes. was last december a mistake? >> no, i think they should have gone earlier and they were too of rate is -- raising rates. now they are teetering on, do they just fall out? there is all the talk of negative rates. the fed has been saying in the last month statement and the minutes again, we cannot quite assess whether the risks are positive or negative. they are more volatile. risks are now, what is the end of the sentence? >> i think the economy has shown signs of improvement. income is strong and retail sales have been strong. there are other issues. manufacturing in the global economy is slowing. i think it is a wait and see approach.
from lower gas prices. we experienced significant headwinds from meat and dairy products. additional sales pressure came from warmer than normal temperatures early in the quarter and delays in the iris tax refund checks impacted the quarter. brendan: the retailer raised its quarterly dividends. boeing ordered a potential strike this year. extension six year that includes a pay raise and more job security. it is one of more than's -- several agreements boeing has reached. in 2009, marx spent about $20 million for about a 1/5 stake in double line capital. oute then, they have paid 150 $8 million to oak tree. the original stake is now worth as much as 900 billion dollars.
that is your business flash. and the cochairman appeared on bloomberg today to talk about that investment and what he makes of recent market volatility. volatility is normal. fits of volatility. i wrote a memo recently and talked about my friend, sandy, the airline pilot, who describes his job as hours of boredom punctuated by moments of terror. that is a description of the investors job. stephanie: that is how you describe an investor life? >> i think it is right or this is one of the last six weeks in the stock market, one of those moments of terror. normal. the reasons are not quite normal. i think the people have gotten used to dealing with normal , but we have now
cosmic issues that people do not have an experience dealing with and do not know how. china, oil, rates, terrorism, just as an example. classes the fear exaggerated or punctuated by the press all -- presidential election? when you see donald trump up u.s. putting fear in the economy and really speaking in declarative statements about the disastrous situation we are in, does that affect the markets? >> i would guess so. they are scaring people. donald says the chinese are killing us and the mexicans are killing us and the japanese are killing us. but we are to get the jobs back. i think that people tend to believe him. be equallycompete to dramatic. it is very hard to compete with
e-commerce business, plus teacher -- attractive valuation. technical faction very similar to those in 2014. the pageevious time, of the recent selling pressure suggests amazon's downside has more to go yet. another big tech mover, one of the most important stocks, apple shares are down more than half of 1% this morning, down 7% year to date as investors evaluate a number of issues. first, will the iphone sales growth continue to slow? what would another potential multibillion-dollar bond yield mean for the company, and most recently, what does the company's refusal to unlock the iphone of a shooter in the san bernardino terrorist attack mean for the company?
apple may have farther to fall yet. brendan: thanks. silicon valley has come to the defense of ceo tim cook. biggest names have rallied around apple. here is the google ceo tweeting, yesterday, an important post by tim cook, forcing companies to promote hacking could compromise users privacy. he covers government and technology from the washington bureau. what is at stake?
reallycon valley is these devices will then become also moan to hackers in general. brendan: this came up after the paris massacre. this is a request for some history. >> it really came to the forefront in late of 2014 when apple released an upgrade to its software that made the contents of your iphone more secure and made what they said impossible for them to hack into some of the data on your phone and immediately, the f ei was voicing its concern about that. there has been an ongoing debate . what occurred this week was the escalation of that conversation. the d.c. discussion really was
not going anywhere and now the fbi has taken it to the course and this will be an ongoing battle now in the courts for apple. this has become an issue on the campaign trail we have got trump from last night talking about this. take a listen. trump: i think it is disgraceful that apple is not helping on that. i think security first and i have always felt security first. we should force them to do it and do whatever we have to do. i guess he wants to be a good liberal and not give the information. politics wellying is admitting you are playing politics at all. tech companies have almost been too good for washington, almost disdainful playing the lobbying game. are they getting better at figuring out how to take their interests to d.c.? valley -- perhaps the auto industry in the finance industry. for years, even apple did not
want to play in this town. we have seen a change. tim cook has been aggressive, coming to town on a regular basis and building up his lobbying shop and really having a voice on the issues important to him. trade group, representing a lot of these companies coming out late last night, supporting apple. we will probably see a lot of the fight done on those trade groups. not want tos do become the targets but they also do not want to be a victim of it. has been following this story and will continue to do so. still ahead, is the fed on the right path? we will ask john taylor next. ♪
word news. vonnie quinn has more from the news desk. is warningth korea that north korea is planning terrorist attacks according to south korea's presidential offer, kim jong-un has ordered military and intelligence units to increase their terror capabilities. the government is pushing the national assembly for antiterrorism bills. in the next two days, david cameron announced eight 2 -- to close the deal on union membership terms. to meet with other union leaders would be aet -- it four-month campaign leading to a nationwide referendum. have important work to do. if we could get a good deal, the payback deal, i will not get a deal that does not meet what we need. good deal for hard work we can get on britain.
turkey police two separatist groups -- a major ally in the fight against the islamic state. turkey's prime minister says he cannot accuse every -- anyone, including the u.s. come of having waste to terrorist organizations. free levels. said they will cap outsources at last month's levels. kuwait has said it supports the proposal and iran has offered banking. doctors without borders says it will not perform its rationale is above the location of medical facilities like the one hit by a deadly airstrike this week. year's syria passes five civil war and one facility alone
would pay four monday, killing at least seven people and eight remain missing. global news 24 hours a day, powered by our 2400 journalists in more than 150 bureaus around the world. i am vonnie quinn. brendan: global market worries are likely to derail the fed's december projection of four rate hikes this year. it was not a bad idea to raise rate hikes in december. you sometimes just get lucky. the right guest at the right time. taylor.w, we have john to talk to us. rulet to talk about your and the actual fed path. you can actually look at it on the bloomberg terminal and if you chart the two together, your rule has the fed going negative and moving up10,
earlier than the actual rate hike we have. should the fed have followed the rule in 2010? >> not negative territory in that case. before the time you see in the chart, we are back in 2003. they were much lower, rates are much lower than what that would suggest. a lot of the excesses, which i think were a factor in the crisis. you look where we are now and the fed it's a little low compared to what history would suggest is good. they still have room to move. i hope they do not fret too much about uncertainty because it breeds its own uncertainty. i want to stay on
negative rates for a second pair the assumption is that it would have all sorts of knock on effects in financial markets. now that we have seen what negative rates have done in sweden, and switzerland and other places, has that changed your thinking now that we have real world of deposits not going into cash when central bank rates go negative? >> those are small countries, mainly the interest the banks get from the central bank. it is not indicative of look at happen with a massive shift. we have to be careful about something like this. thinkmportant, i do not it is necessary. we are in a situation where the economy is growing and the fed seems to react. the uncertainty you can see in the minutes just released. me, if they stuck with these kinds of strategies and roles, rules-based policy, it would improve things. back to that,t because that is the lesson.
negative rates is not where the u.s. needs to go at this time. brendan: reading between the lines, one of the things, the arguments they seem to be having is about inflation expectations. take a listen. >> patients has drifted further down at least during the first six weeks of 2016. that move in inflation expectations has a big impact on the phillips curve the fact that littlehrough, whether a higher or a little lower. >> for several months now, he has been talking about the five-year forward, the market expectations. him, is ite with possible inflation expectations have in fact slip their anchor and it is possibly stuck lower? >> it could be. hardest thing the
to measure for sure. monetary policy, you do not want to overdo it because people have different views. it has led the fed astray in the to guess what try happens in the economy and react to that you see a little of that now. where they are now with respect to the currency to the economy is what they should be looking at. expectations are crucial in terms of the impact of policy but i do not think the fed should overdo its reaction to those kinds of factors. one of the things the fomc has been having trouble they see risksr on the upside or the downside and the minutes they even punted on it and said we were concerned about increasing uncertainty over the risks. help us out. you see those risks? are the risks on the upside with the downside now? both sides. that is the problem. uncertainty is a spread it be up or down?
i think it reflects the fed's conundrum in many respects. you have to remember they can create their own uncertainty and it is a feedback here they create uncertainty because they say we will raise rates, we will not raise rates, there is a great deal of debate and the markets react with uncertainty and said, there is too much uncertainty and we will have to hold back and that creates more uncertainty. you have to arrest that back-and-forth. i think the best way is for the fed to lay out as best it can its strategies and roles so it is clear to people and i think you get back to a better growth situation and abettors economic -- a better economic situation all around. >> you make clear what your prescription is going forward but there is an ascension the labor market is tightening and we will see real wage gains. we have seen signs of that but not a clear signal. do you see the lack of a labor market now? >> a big disappointment in the forcemarket is the labor
participation is much lower than people thought would happen. that is one of the reasons the unemployment rate has come down. i do not think of that as a monetary thing. i think it is due to regulations and concerns about other various kinds of laws with the budget. there are a whole lot of other things that address that. i think the government as a whole needs to address that. monetary policy, where all the conditions are that the unemployment is near-normal and inflation rates are below the 2% goal but not much, all of it points in that direction and the labor market really depends on so many other things. larry summers said bankersg many central have said, that we have done all we can, that it will have to be fiscal policy -- policy. is that prescription right?
>> completely. there are so many things that need to be done to get the economy to grow more rapidly. productivity growth needs to increase, labor force participation has to increase. taxet reform, i think reform is essential. a high corporate tax in the u.s. i am not sure what larry is referring to but there is no question that monetary policy more than they can. to some extent, central bankers may not like that but they brought it on because they did a lot of things. when someone is out there saying, we will do this and it reduces incentive for real things to get done by other people. that is the problem at this point. they have to find a way to pull back. ok, john taylor. thank you. just ahead, the mess can pay so weakening.a dollar five years on wednesday. headed to mesko city coming up next. ♪
of stabilization. inflation picked up rising a percent for a record 47 month. inflation could be short-lived, driven by food prices. bloomberg news, hong kong. brendan: now off to europe, mark barton sees european stocks higher than better than expected earnings. mark: quite a rebound from the lows of last thursday, which i will tell you about. it just ruffles through some of the big industries p or we seeing declines in london. the oil companies declining but most of the other major european primary industries sporting gains today. utilities driving today passes advanced p or the stoxx 600
utilities gauge up by 1.8%. all bar the basic resources, food and beverage, banks gaining today. these are individual gains. i will tell you about it at the top of the hour. check out the gains for the big european carrier, up by 11%. nestle produces the likes of perrier and kit kat. it will not meet its long-term sales target this year. that would be for the fourth consecutive year. not so good for nestle and the lot -- not a bad day for the stoxx 600. the fourth day of gains and five. brendan: we are heading for the european close, at the end of which i will humiliate you are what will happen to that humiliation? mark: i am excited about that. i'm excited about having our man ride in brussels and the british prime minister david cameron with to thrash out a deal
his fellow eu leaders are we will speak to the labor menu -- member of parliament, the former labor business spokesperson, who will be joining us. we cannot wait to talk to him. patrick spencer will chat about the s&p rebound. battle of the charts, greeley versus barton, that is the big one. it is london fashion week starting to morrow. from not just a label, look it up on the internet, a fascinating company p or he says the fashion industry needs to be shaken up. he calls it complacent, and i am looking forward to our conversation with him. a big our coming up. the european close in a matter of minutes. will headhank you we to the markets desk where julie hyman is never complacent. julie: i will definitely june and -- tune in for that. we are seeing the dollar fall
versus the japanese yen. we heard julianna talk about some of the japanese economic data. the euro declining in the pound is gaining. i want to point out movement in the euro. down today, but down for the fifth straight session. this is the longest losing stretch we have had for the euro in 10 months. it is on speculation that ferment -- further stimulus will be coming in for the eurozone. it madety is way up and currency traders jobs much more difficult. this is a jpmorgan index that tracks volatility in currency. it is at the highs in four years. this is a five-year chart. at the highest in about four years. to take an example, take a look at the forecast for the yen. the function on the bloomberg terminal, here is the actual price of the yen, it goes back about a year here. here is the median forecast of folks we surveyed versus
contracts in the yen. diversions, one of the ways to illustrate for people to forecast current is right now p one thing to look at is how the dollar performed there and month to date for the dollar. all these currencies have risen against the dollar this month thus far. that has been up from the past year where the dollar has outperformed us and most other currencies. uncertainty is one of the risks page for the coming year. we will stay with the mexican peso, staging a major reversal. the dollar is weakening. it said it would raise benchmark interest rate. benjamin livein for us in new york city.
the governor of the central bank does he like these kinds of surprises? this is a surprise move. is that in keeping the way he likes to run? >> good morning. it is a huge departure. it is no secret, the match -- , to havepay so volatility in times where there are global field -- glover -- global fears. a rules-based approach. going back to december of 2014, they have been holding daily dollar sales with the idea of preventing the pace of from depreciating too much, limiting volatility. they have always said they're happy as long as the market is functioning well.
we saw on wednesday it was a significant departure. came outce ministry and said they are getting rid of the rules-based options and they will basically intervene and sell dollars to banks at their discretion, when they think it is necessary. it is a big departure and reflect what we have seen so far. we started through tuesday of this week, the worst performing currency of the world, down 9%. the government does not think that reflects the fundamentals of the mexican economy. 2.8% growth projection this year by bloomberg economists surveyed. brazil,pares with headed toward a major -- brendan: they are having a better year than brazil but so is everyone. we heard the government say it is not in keeping with fundamentals. mexico has -- what
ofenue collects informs taxes. accounts for about 1/5 of the revenues the mexican government has in its budget to the price of oil is near a 12 year low. that hit the mexican government recreant public spending directly. it has a huge impact on the economy. mexico had to do something. moves on wednesday caught a lot of people by surprise. market reaction was certainly favorable to start. the peso was up about 3.5% yesterday. more than onep percentage and a half. initial reaction is positive. i love that shot. thanks. still ahead, more reasons why gun sales are booming in america coming up next. ♪
brendan: welcome back. our next story takes us to a shopping mall in nevada, located southwest of the strip, 1900 square feet of guns and ammunition, i know so on, and a starbucks. paul spent three days behind the counter and joins us now to break down the deal of how firearms are sold in america. the argument is always been that we do not need new laws or background checks and we just need to enforce what we have here it from your experience, how are the laws we have now working? saw a considerable amount of diligence or most gun dealers are following the law and in some cases going beyond the strict letter of the law. armory, they do not follow it they are allowed to do
with federal background checks, to say if a background checks gets delayed for three days, a gun store is surprisingly allowed to go ahead and make the gun transfer even if the federal government has not approved of it. they do not do that they wait to see the determination. at the same time, there are slipups and when you have slipups with firearms, you could have potentially lethal consequences. brendan: what is the fix? [laughter] i am sorry parallel us to send to your place behind the counter. what would need to happen just to tighten the slipups you saw? >> if you had far stricter and gun stores aware the government was looking over their shoulder on these might haves, you even tighter compliance of the loss. i thought it was
interesting culturally what you got out of watching this. you have been writing about firearms in the u.s. for a long time. the obama surge thing they talked about, that is a real thing. right in frontd of me. there are four things selling guns today. a fear of home intrusions, fear of greater gun control, fear of school shooting scenarios and fear of terrorism. very little of what is being sold in a typical gun shook -- gun store will be sold as an anti-death used as an antiterrorism weapon. it is not that the fear is rational but it is powerful and i heard customer after customer saying, i live next to a golf course and i'm worried about a guy coming into my house, which gun would you recommend. that customer would be someone who already owned a gun or two or three and was out to buy another one. understand what
is happening now with the new supreme court. what might happen with shkreli a knot on the court? >> justice scalia is the author of the 2008 decision that recognized individual rights to own a handgun in the home under the second amendment. that was a five-four decision. you take the author way, a court is divided 4-4 men who gets appointed to replace him could redefine that right. brendan: thank you, paul. week cover story is inside were apple makes its chips. check it out on your tablet. ♪
brendan: we're going to take you from new york to london and to brussels. european stocks are on a roll, hitting a two week high thanks to better than expected earnings. kamman -- david cameron tries to close the deal to keep the u.k. in the european union. on the: and they are runway and ready to take off. dozens of designers will show off at new york fashion week. but first we go to julie hyman at the market desk for an update on crude oil inventories. crude oil inventories coming out in just the